#31 The Value Investor

The news of the week is Warren Buffet announced he’ll step down as CEO at the end of the year. 

I have to admit, I've been pretty bummed I did not end up going to Omaha this year, which I had considered pretty seriously. (Travel costs were ironically equal to 20 BRK-B which felt like the option Charlie Munger would have advised, and we had a friend visiting Boise anyway.)

Here's what really grinds my gears though:

Over the weekend, we were inundated with thought pieces repeating variations of the title "there will never be another Warren Buffet."  

I get it, we all have headlines and deadlines, but c'mon.

The thing about Warren Buffett is there ALREADY ARE more of him–they're just not famous.  Here's what he stood for in a nutshell:

1. Long term thinking, aka discipline, and patience.

2. Just avoid unforced errors, aka, be smart and self-aware.

3. Align incentives, aka, add 1 and 2 before you write a contract.

None of this is new, and none of it is that hard to do. What’s really hard to do is exactly what Buffet did: just say and do the exact same stuff for 60 years.

When it comes to narratives (and to use a phrase Warren would), compounding is a wonderful thing. 

And sure, I get it, Warren IS famous. We probably won’t have another investor as famous as he. 

But that’s obvious. He got cool when we had four news outlets and no websites. If you’re trying to be famous for anything after 2016, you need to remember the current word for TAM is “niche.”

Even Marc Andreesen gets tagged in the news with a qualifier like “venture capital icon,” or “Silicon Valley titan,” because honestly who in the heck outside of tech is ever going to remember the guy who gave Adam Neumann 300 million dollars make the Fyre Fest of REITs?

Besides, I said there’s already plenty of other Warrens. Who the heck are they??

Well a lot of the Warren wannabes were in Omaha this weekend. Here’s two I like quite a lot and who happen to friends of each other.

1. Mohnish Pabrai.  

I’ve mentioned Mohnish before (issues #8 and #23), and if you haven’t picked up his book yet, I still recommend it (link in the PS).

You could get an okay sense of his ideas on YouTube, but he’s a pretty bad interviewee and a mediocre lecturer. As an author he’s patient and wise. 

Here are some reasons why.

His telling of the story of the Patels may be one of the better current accounts. It’s as entertaining as it is instructive. 

He’s very clear in his conviction that it is usually better to copy or buy than build. I don’t always agree with this, but it’s true more often than we builders (🙋🏻‍♂️) like to admit.

Mohnish’s review of Microsoft’s copying strategy is subtle and powerful.

My experience during Dropbox’s heady days was to collectively dismiss Microsoft as a competitive threat because “they just moved too slow slowly.” We believed we were shipping and innovating at high speed (we were-ish), and since MSFT didn’t have that in their DNA, they’d never win.

Today, Sharepoint has handily made Dropbox irrelevant. (Sharepoint, in fact, a free feature of a paid product, owns more of the document collaboration market than Google by a double-digit margin).

Mohnish's explanation of Microsoft's unique prowess here would have fallen on deaf ears to us back then.

Rightly, we would have ignored it at our own expense, which in hindsight was an enormous expense.

(If anybody would like some DBX shares, let me know, I think they’re in a drawer somewhere with my old printer manuals.)

So if you are in tech, or if you just like using money to make more money, I think you should read The Dhando Investor. 

I will warn you, though: investor memoirs are a certain type, and it’s an annoying one. Whenever Publera wrote investor memoirs I would talk to my raft guide friends, since raft guides also have a god complex. 

But there is one investor who is a little bit more humble, or at least more self-aware, than the average investor-author: 

2. Guy Spier.

Guy is proof of the cardinal financial rule that the absolute best way to make an enormous amount of money is to get a bunch from your dad.  

To his credit, he’s really open about it. To call his book “raw” might be a stretch, but it’s refreshing to read an investor memoir that covers so much ground on “all the things I was wrong about.” 

I’ve enjoyed thinking more about my mistakes as I get older, because I get a little bit better at avoiding them. And if you can’t laugh at yourself, it’s really not fair to laugh at the lady road raging at ducks.

In any case, there's a lot of good stuff and a few eye rolls, but Guy's is a fun mind to inhabit. 

One trick I stole from Guy, and which he explains in the book, is the power question of asking yourself, "if I said yes to this ask, what would my life look like if I said yes in every similar situation?" 

That question is a really powerful trick for getting rid of the ad-hoc crazy feeling in your inbox. And your life.

It's also pretty handy for refining an investment thesis, or deciding whether or not to honk your horn at a duck.

And I’m still a quack,
Jesse

PS: LINKZ! 

• Mohnish’s book, The Dhandho Investor

• Guy Spier’s book, The Education of a Value Investor

• Want to get your head out of the investor hubris and your ears perked up when I said “raft guide”? Read The Emerald Mile

• SONG OF THE WEEK If you can’t get some enjoyable work done to this classic, you might never find flow.

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